Do Sempra Shareholders Need Any Further Massaging?

San Diego Gas & Electric's strategy (with the California Public Utilities Commission's surreptitious concurrence) is a classic case of an American corporation raping its customers to enrich its shareholders. You can see this from information provided by Sempra Energy, SDG&E's parent. In its recent annual report, Sempra boosts of the performance of its shares. From year 2000 through 2010, Sempra stock zoomed 208%. In the same period, the Standard & Poor's 500 went up a mere 15%, while the S&P utilities index (a proxy for utilities) rose up an anemic 8%. Yet SDG&E wants its customers to pick up the tab for past and future fire costs beyond insurance coverage, rather than to have shareholders pick up that tab. Under capitalism, shareholders should pay for management incompetence, and regulators found that the 2007 fires were caused in great part by SDG&E's negligence. SDG&E and Sempra, along with commissioners of the California Public Utilities Commission, must not only explain this to San Diegans who will pay enormous sums to coddle shareholders; they must be put under oath to unearth the collusion of SDG&E and the commission.

SDG&E won't pay it as long as the CPUC represents shareholders and cares not a whit for utlility customers. Here's how it would likely go down. SDGE would pay some kind of fine or recompense. Then buried somewhere in fine print, the CPUC will repay SDGE on some phony pretext -- in fact, might even overpay SDGE to cover its administrative costs. Best, Don Bauder

From the standpoint of a shareholder, the current Sempra management is most competent, as evidenced by the marvelous increase in share value over that decade. Speaking of the management of SDGE, from an operational standpoint, there is a definite competence shortfall. After all that was "learned" from the fires of 2003, there was no excuse for SDGE to have neglected its lines in any part of the backcountry by 2007, and that's just what happened. But these blackouts indicate that they're not retaining the accumulated knowledge of decades of how to run a local power grid. Worse yet, when they have a blackout, it is as likely as not that they don't know what caused it, don't know how to react, and thus have it last for hours and hours. The whole picture is not a happy one, and doesn't make me feel at all confident that we will avoid having more such mishaps, not fewer in future years.

Good points. And how do you feel about having you, the ratepayer, cough up for SDGE's management negligence while Sempra shareholders luxuriate in the knowledge that Sempra and the utilities commission care ONLY about shareholders, and don't give a hoot about customers? Best, Don Bauder

Well, . . . as it turns out, I'm both a ratepayer and a Sempra stockholder. Sempra can be very profitable without this giveaway, and losing the battle might make them better managers. Or not. So, to answer your question, losing this battle should force Sempra to look closer at its operations and improve them. If they stand no risk from their incompetence, the incompetence will only grow. I'll forgo the benefits to the stockholders in favor of my small monthly bill, and expect to see Sempra management redouble efforts to make the company better run.

I can't own Sempra stock (or any San Diego stock or bond) for obvious conflict of interest reasons, but I do have a portfolio loaded with utilities stocks. Several are southern with big hurricane exposure. Now, a hurricane is truly an Act of God under the conventional definition. And at least one southern utility wants to pass hurricane liability to ratepayers. Even though it has been found culpable in the 2007 fires, SDG&E has the audacity to claim the 2007 fires were analogous to hurricanes. Not so at all, because in the hurricanes, the southern utilities weren't cited for negligence. However, as a shareholder of southern utilities, I believe that hurricanes are part of the risk. Management may be blameless, but shareholders should not escape liability even in an Act of God. Best, Don Bauder